2017 (11) TMI 1298 - HC - VAT and Sales Tax

Interest on refunds - relevant date for computation of interest - Section 42(1)(a) of the Delhi Value Added Tax, 2004 - interpretation of statute - case of the respondent authorities is that the petitioner/ IJM Corporation Berhad would be entitled to refund in terms of Section 42(1)(a) of the Act after a period of one or two months, as the case may be, from the date of filing of the Return and not from the date of filing of the return - Held that - When we harmoniously read Sections 38 and 42 of the Act, which relate to processing of claim for refund and payment of interest, it is crystal clear that the interest is to be paid from the date when the refund was due to be paid to the assessee or date when the overpaid amount was paid, whichever is later. The date when the refund was due would be with reference to the date mentioned in Section 38 i.e. clause (a) to sub-section (3). This would mean that interest would be payable after the period specified in clause (a) to sub-section (3) to Section 38 of the Act i.e. the date on which the refund becomes payable. Two sections, namely, Sections 38(3) and 42(1) do not refer to the date of filing of return. This obviously as per the Act is not starting point for payment of interest. Under sub-section (2) of section 39, interest would begin from the period specified in clause (a) to sub-section (3) to Section 38 of the Act, albeit the quantum of refund would depend upon the adjudication. In the present context, we would not like to go into the multifarious situations which may arise when an assessee files the revised return. It would be more appropriate and proper for the authorities under the Act to examine each and every case wherein a revised return has been filed and thereafter, determine whether the assessee would be entitled to interest and, if so, from which date, on the findings. We leave the question/issue open. It is directed that the authorities will examine the question of interest payable on refund and the date from which it is payable in accordance with the aforesaid dictum and principles - petition allowed by way of remand.

Summary

Issues Involved:
1. Starting point for computation of interest payable on refunds under Section 42(1)(a) of the Delhi Value Added Tax, 2004.
2. Maintainability of the writ petition in view of the alternative remedy.
3. Interpretation of Sections 38 and 42 of the Delhi Value Added Tax, 2004.
4. Impact of filing a revised return on the computation of interest.

Issue-wise Detailed Analysis:

1. Starting Point for Computation of Interest Payable on Refunds:
The primary issue in the writ petitions is the determination of the starting point for computing interest payable on refunds under Section 42(1)(a) of the Delhi Value Added Tax, 2004. The petitioner argued that interest should be payable from the date of filing the VAT return, while the respondent contended that interest should be payable after the period specified for processing the refund/returns as per Section 38(3) of the Act. The court examined Sections 38 and 42 of the Act, noting that Section 42(1) stipulates interest is payable from the later of the date the refund was due or the date the overpaid amount was paid. The court concluded that the interest is payable after the period specified in Section 38(3), which is either one month or two months from the date of filing the return, depending on whether the tax period is monthly or quarterly.

2. Maintainability of the Writ Petition:
Initially, the respondent raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative remedy. However, this contention was not pressed by the respondent's counsel, with the clarification that the respondent could raise this issue in another case if necessary. The court proceeded to address the substantive issue of the starting point for interest computation.

3. Interpretation of Sections 38 and 42 of the Delhi Value Added Tax, 2004:
The court provided a detailed interpretation of Sections 38 and 42 of the Act. Section 38 outlines the procedure for refunds, including the time frames within which refunds should be processed, while Section 42 deals with the payment of interest on refunds. The court emphasized that these sections must be read harmoniously. Section 38(3) specifies that refunds should be issued within one month for monthly tax periods and within two months for quarterly tax periods. Section 42(1) states that interest is payable from the later of the date the refund was due or the date the overpaid amount was paid. The court clarified that the starting point for interest is not the date of filing the return but the date specified in Section 38(3).

4. Impact of Filing a Revised Return:
The court acknowledged that there may be cases where an assessee files a revised return, leading to questions about the starting point for interest computation. The court noted that this issue would depend on the factual matrix of each case and should be examined by the authorities under the Act. The court highlighted that if the delay in granting the refund is attributable to the assessee, the period of delay should be excluded from the interest computation. The court left the question open for the authorities to determine on a case-by-case basis.

Conclusion:
The court directed the authorities to examine the question of interest payable on refunds and the date from which it is payable in accordance with the principles outlined in the judgment. The authorities were given four months to complete this exercise. The writ petitions were disposed of without any order as to costs.